U.S. Treasury auctioned $22 billion of 30-year bonds High Yield @5.058%. Bid-to-Cover Ratio 2.44x, healthy overall demand. 30-year mortgage rates edged higher today. The benchmark 30-year fixed-rate mortgage average rose to 6.49%.
I believe that the 30-year treasury auction hasn’t breached 5% since before the housing crash.
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@TucsonBones the 30-year Treasury yield has breached 5% several times since 2022.
The yield has been in a rising trend since 2022 since inflation has not proved to be transitory.
The question for bond investors is whether the yield will bounce down from resistance at about 5.1% or whether the Macro trends forcing the yield up, such as inflation and relentlessly increasing federal debt, will cause the 30 year yield to break through resistance.
This is a high-risk question for investors since the value of a 30-year bond yielding 5% would drop by 15% if interest rates were to rise to 6%. Of course, the bond would continue to yield interest and there would be no capital loss if the bond was held to maturity.
Note that the TIPS yield is also rising. This indicates Macro forces in addition to rising inflation.
Wendy
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True dat, if we’re talking about the secondary market. Last week’s 30-year auction had the highest yield since 2007.
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Talking about rates, it’s instructive to look at the very short end as well. Fedwatch (which remember has real money on the futures/contracts behind it) is still showing a good probability of a rate hike this year. That’s after the moderating inflation data this morning. Seems like the people don’t quite believe the inflation monster has been slain.
81.2% chance of a hike by Dec meeting.
68.7% by Oct meeting.
59.8% by Sep meeting.
These are still pretty high.
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